FHA rental income: 75% is only the beginning.
How rental income is calculated depends on whether the property is being purchased, already owned, shown on tax returns, a 2–4 unit, or a one-unit home with an ADU.
Subject property with limited/no rental history
Where FHA permits projected rental income and the borrower lacks the required tax-return history, the lender generally uses 75% of the lesser of the appraiser's fair market rent or the lease/rental agreement, subject to the specific subject-property rules.
Rental history shown on Schedule E
For established rental income, FHA generally analyzes the tax-return history. Depreciation shown on Schedule E may be added back when calculating net rental income. If the property has been owned for less than two years, FHA provides an annualization method based on the actual ownership period.
Other real estate holdings
For retained rental property, positive net rental income is added to effective income and a net rental loss is treated as a liability. The calculation differs depending on whether reliable tax-return history exists.
2–4 unit owner-occupied properties
FHA can use eligible rents from the other units of an owner-occupied multifamily property. Three- and four-unit properties must also satisfy FHA's self-sufficiency rental income test: the property's PITI divided by monthly Net Self-Sufficiency Rental Income may not exceed 100%.
Accessory Dwelling Units (ADUs)
For an eligible one-unit property with one ADU, FHA permits certain actual or projected ADU rent to help qualify. With limited/no rental history, the current framework uses 75% of the lesser of appraiser market rent or lease where applicable, and the ADU rental income used as effective income may not exceed 30% of the total monthly effective income used to qualify the borrower.
Boarder income is different
A person renting space inside the borrower's dwelling unit is a boarder, not an ADU tenant. FHA's manual rules generally require a documented two-year history of boarder income reported on tax returns and current receipt of the income.
Policy source
Primary source: HUD/FHA Single Family Housing Policy Handbook 4000.1, including the August 12, 2026 update. FHA policy, AUS findings and lender overlays must be verified for the actual transaction.